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A Neat Way to Get Rid of the UK's National Debt?
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You would think that Gideon was about to make his autumn statement or something, and needed some smoke and mirrors to prove that Plan A is not failing quite that miserably.
You need to make it look like that when you have no plan B.
It is a bit like a particularly strange game of pass the parcel, with the nation's debt in the centre when the final bit of wrapping paper is removed, and neither Gideon, the BoE nor its ofshoot which purchases government gilts want to be left holding the parcel when the music finally stops."When the people fear the government there is tyranny, when the government fears the people there is liberty." - Thomas Jefferson0 -
Very simple really.
The Treasury borrows money on the open market with which to pay the interest coupon on gilts.
Some Gilts are held currently by the BOE. So the Treasury pays the BOE. Who deposit the funds into a ring fenced bank account.
There is no logic in the UK borrowing more money to pay itself.
The only benefit is the interest saved on the additional £35 billion that currently resides with the BOE. So very small impact on the PSBR in cash terms.0 -
I thought the BOE was independent.....
Little different to the ONS/Head of Government Statistical Service?"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
grizzly1911 wrote: »I thought the BOE was independent.....
Little different to the ONS/Head of Government Statistical Service?
Don't worry, the ONS are on board, and have stated that this sort of solution would show a legitimate reduction in the defecit statistics.
Saw one comment that summed it up....
..."which teacup is the pea hiding under"0 -
Is it just coincidence that the pound has seen roughly 0.5% wiped off it's value against every other currency?0
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Graham_Devon wrote: »Is it just coincidence that the pound has seen roughly 0.5% wiped off it's value against every other currency?
:doh:You weren't suppose to notice that"If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
HAMISH_MCTAVISH wrote: »This was always going to happen.
One branch of the UK state apparatus, the BOE, now owns more than a third of all outstanding UK government debt.
The treasury pays interest on the debt to the BOE, who then hand it back to the Treasury.
I agree that this was always likely to happen.HAMISH_MCTAVISH wrote: »It's not quite a free lunch, but its damn close.
It's just an accounting change really. It doesn't alter anything beyond stopping a pointless accrual. I'm surprised the BBC felt it was worth 2 articles on its website as I'm not sure it was worth 1.
As to the dumb comment from Mr Ostwald in the Guardian, !!!!!! did he think QE was? It's a temporary monetisation of debt. Whether it stays temporary is still a very open question IMO. My guess is that the BoE will let the debt expire and then pay back the coupon and principal payment to the treasury.0 -
So much for all those postings about how the Government is so right to cut spending because servicing the national debt is costing the taxpayer £37trn a day. Or maybe 3p a day by the time the ONS has finished."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0
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Thrugelmir wrote: »Not an accrual as involves a physical transfer of cash.
Wouldn't it just be a book entry at the BoE as the BoE (I think) pays coupons on Gilts? I am not an accountant nor do I pretend (or indeed intend) to be.0
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